buyer: Questex Media, Audax Group | seller: Advanstar Communications | price: $185 million | date: April
takeaway: The Questex spin-off gives neglected properties a chance to shine, if its new owners are willing to commit to developing them.
In early 2005, rumors began circulating that Advanstar Communications was exploring the sale of some of its properties to begin preparation for either a sale or pursuit of an IPO. In April, the company announced a sale was being made;to Kerry Gumas, Advanstar’s then vice president and general manager of the Information Technology & Communications Group.
With backing from investment firm Audax Group and $185 million in cash, Gumas took over Advanstar’s Information Technology & Communications, Travel & Hospitality, Beauty, Home Entertainment and Abilities and Portfolio groups, renaming them the Questex Media Group. "Advanstar made a strategic decision in 2004 to pursue a number of alternatives for its corporate development and one of them involved identifying groups in the industry that could be formed into a second company, presented to the marketplace and sold," says Gumas. "When that decision was made I stepped forward and asked the CEO and board if they’d consider an offer from me. The board approved and it was a relatively quiet process."
While the groups being sold generated a combined $100 million for Advanstar in 2004, the company identified beauty, technology and travel products as weak performers. For Gumas, the biggest challenge was spinning off Questex from the Advanstar machine while continuing to serve existing customers. "We are a diversified media portfolio;we’re in five different industry sectors, we’re operating 23 magazines, 20 trade shows, 25 conferences and 50 Web sites, and we’re doing that in the U.S., Europe, Latin America and Asia," says Gumas. "We were in 14 different Advanstar locations and we needed to effectively move into a standalone corporate infrastructure;completing that while still doing business and not disrupting customers. The process began the day we closed and we’re pretty much at the tail-end of it." Questex is headquartered in Newton, Massachusetts, with 11 branch offices and 375 employees.
Nearly a year after the transaction, Questex is still generating revenue in that $100 million range, according to Gumas. "Trade shows have been strong performers in terms of overall profitability," he adds. "Our print numbers are relatively flat, however we’re getting strong lift from our digital media business. That was one of the features of this company that was attractive to us;substantial opportunity to grow and leverage digital media. It wasn’t fully developed within Advanstar. The problem we had in Advanstar was too many sectors and too many industries. You couldn’t get a strong, deep sector focus because you’re trying to spread your dollars across too many markets."
The biggest challenge for Questex could be the level of commitment from Audax. A specialist in "middle-market companies," the Questex deal represents the investment firm’s first venture into publishing. If Audax is not committed to leveraging Questex in light of its other investments, Questex could find itself in the same predicament those properties had at Advanstar;neglected for sexier properties. "We’re trying to drive a cultural transformation," says Gumas. "We’re not just trying to change the name but also the culture and breed a culture of entrepreneurship and innovation and strategic risk-changing rather than a purely operations and cost-focused culture."
comments: Audax needs to commit to becoming dominant in each market. . . Questex acquires a company with market-leading titles and a nice core of ancillary products to boot. . . A smart idea of spinning off properties in certain markets so that Advanstar can concentrate on core areas.
http://www.questex.com/questexmg/v42/index.cvn | http://web.advanstar.com/advanstar/v42/index.cvn